COMMISSIONER OF INCOME TAX vs. M/S MANIPAL FINANCE CORPORATION LTD.,

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ITA/372/2013HC KarnatakaKAHC01032135201326 June 2023Bench: P.S.DINESH KUMAR,T.G. SHIVASHANKARE GOWDA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The questions of law were answered in favour of the assessee and against the Revenue. The Court noted that the assessee's counsel had submitted that the issues were covered by a previous decision of the High Court in the assessee's own case for a different assessment year, and that the Revenue's SLP against that order had been dismissed. The Revenue's counsel did not dispute this submission. Consequently, in view of the binding precedent and the lack of dispute from the Revenue, the High Court found no reason to interfere with the ITAT's order. The operative direction was to dismiss the appeal and answer the questions of law in favour of the assessee. No costs were awarded.

What were the facts?

The Revenue, represented by the Commissioner of Income Tax, Mangalore, and the Dy. Commissioner of Income Tax, Circle 1, Udupi, filed an appeal before the High Court of Karnataka against an order dated March 12, 2013, passed by the Income Tax Appellate Tribunal (ITAT), Bangalore. The ITAT's order pertained to Assessment Year 2008-09. The appeal challenges the ITAT's decision to treat the principal portion of forfeited deposits and debentures as a capital receipt, not liable to tax. The High Court had admitted the appeal to consider substantial questions of law. The procedural history involves an order from the Commissioner of Income Tax (Appeals), Mysore, dated March 21, 2012, which was also under challenge.

What were the issues?

The High Court was to decide the following substantial questions of law: 1. Whether, on the facts and in the circumstances, the Tribunal was legally correct in holding that the principal portion of deposits and debentures forfeited by depositors and debenture holders constitutes a capital receipt and is therefore not taxable? 2. Whether, on the facts and in the circumstances, the Tribunal was legally correct in concluding that for a finance company, the principal portion of deposits taken and subsequently forgone by depositors does not represent income earned in the ordinary course of its business? 3. Whether, on the facts and in the circumstances, the Tribunal was legally correct in not adhering to the precedents set by the Supreme Court of India in CIT Vs. Lakshmi Vilas Bank Ltd., 220 ITR 305, and CIT Vs. T V Sundaram lyengar & Sons Ltd., 224 ITR 344? Assessee's Contention: The assessee's counsel submitted that all issues raised in the appeal were covered in favour of the assessee by a prior decision of the High Court in the assessee's own case for a different assessment year, and that the Revenue's Special Leave Petition against that decision was dismissed. Revenue's Contention: The Revenue's standing counsel did not dispute the assessee's submission.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2023:KHC:21934-DB ITA No. 372 of 2013

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF JUNE, 2023 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE T.G. SHIVASHANKARE GOWDA INCOME TAX APPEAL NO.372 OF 2013 BETWEEN:

1.

COMMISSIONER OF INCOME TAX, MANGALORE MANGALORE 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1 UDUPI …APPELLANTS

(BY SHRI. E.I. SANMATHI, STANDING COUNSEL) AND:

M/s. MANIPAL FINANCE CORPORATION LTD., MANIPAL HOUSE MANIPAL-576 104 …RESPONDENT

(BY Ms. JINITA CHATTERJEE, ADVOCATE FOR SHRI. S. PARTHASARATHI, ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12.03.2013 PASSED IN ITA NO.668/BANG/2012 FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.668/BANG/2012 DATED 12.03.2013 AND ORDER OF COMMISSIONER OF INCOME TAX, (APPEALS), MYSORE DATED 21.03.2012 IN ITA NO.15/UDP/CIT(A)MNG/2010-11.

Digitally signed by ANUSHA V Location: HIGH COURT OF KARNATAKA

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NC: 2023:KHC:21934-DB ITA No. 372 of 2013

THIS ITA IS COMING ON FOR HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal by the Revenue challenging the order dated March 12, 2013 in ITA No.668/Bang/2012 for the A.Y.2008-09 has been admitted to consider following questions of law:

(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the principal portion of the deposits and debentures forfeited by the depositors and debenture holders is a capital receipt and hence not liable to tax?

(ii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that in the case of finance company the principal portion of deposit taken by the company and subsequently forgone by the depositors does not constitute income earned in the normal course of its business?

(iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not following the ratio of judgments of Hon'ble Supreme Court of India in the cases of CIT Vs. Lakshmi Vilas Bank Ltd., 220 ITR 305 and CIT Vs. T V Sundaram lyengar & Sons Ltd., 224 ITR 344?

2.

Heard Shri E.I.Sanmathi, learned standing counsel for the Revenue and Ms.Jinita Chatterjee, learned advocate for the respondent-assessee.

3.

At the outset, Ms.Jinita Chatterjee, submits that all issues raised in this appeal are covered in favour of

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NC: 2023:KHC:21934-DB ITA No. 372 of 2013

the assessee and against the Revenue by the decision of this court in assessee’s own case for different assessment year in ITAs No.794 & 795 of 2008 and SLP No.15037/2015 filed by the Revenue challenging the said order has also been dismissed. Her submission is placed on record.

4.

Shri Sanmathi, in his usual fairness, does not dispute the above submission. 5. In view of the above, the following; ORDER (i) Appeal is dismissed; (ii) Questions of law are answered in favour of the assessee and against the Revenue. No costs.

Sd/- JUDGE

Sd/- JUDGE

AV List No.: 1 Sl No.: 8

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